Employment: The Older Worker Story

by: John Lounsbury

Calculated Risk writes about the plight of those trying to compete in the labor market in the years before retirement. It is pointed out (see graph below) that the unemployment rate for those in the 45-54 and 55-64 year old age groups is at the highest level since before World War II.

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However, things may be much worse in Europe. The following graph from Real Clear Markets shows that the older worker is participating in the labor market much more in the U.S. than in Europe. The employment rate for over 55 workers in the U.S. (61.8%) is 38% higher than for the average for all Europe (44.7%).

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I am having trouble verifying the number that is displayed in the graph for the U.S. Until proven otherwise I will assume that the data is an apples to apples comparison. However, I can not determine the variety of apples or that there are no rotten apples in the barrel. Therefore, reader be wary.

The data base at the BLS (Bureau of Labor Statistics, U.S. Dept. of Labor) contains the following table:

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This table indicates that the employment rate for the 55 and over population is around 37%, much like many European countries in the Real Clear Markets graph.

It is true that older workers have been less affected by unemployment in this recession than have younger workers. This is clear in the following table.

The 55 and over age group has the lowest unemployment rate using the official U-3 unemployment rate which many, including this author, argue under reports the true level of unemployment. See "True Unemployment Numbers". However, we are making comparisons and distortions from selection of one unemployment rate measurement over another should be minimal.

The older age group is the only one that shows a ten year increase in employment participation rate. The increase in the number of people working past early retirement age is one of the factors contributing to the draconian drop in employment participation in the younger age groups, particularly 16-24 years of age. When older workers remain in the labor force, there are fewer entry level positions for the young.

Even more interesting results are found when the 55 and older data is broken down into age groups. While the participation of 55-59 year old workers is little changed over the past ten years, older age groups are staying employed longer. The older the age group, the greater the number remaining employed.

For those 70 and older, there has been an increase by over a third in the percentage still working. Since this demographic has been growing rapidly in recent years, the absolute number of 70 and older employed has increased far more than the 1/3 increase in employment participation. In January 2000 there were 1.847 million people 70 and older employed. In January 2010 there were 2.713 million, an increase of 47%. The increase for 75 and older was 63%, to a total of 1.2 million in January 2010.

I recall reading an article recently that described a survey of people 60 and older. I recall that 70% of the respondents said they intended to keep working, rather than retire, for economic reasons. That is, they couldn't afford to stop working. I have been unable to recover that source so I can't determine details of the survey, or even if I have the bottom line correct.

If it was a survey of people currently working, then the indication is that participation rate of those now 60-64 (51%) could be 35-36% when that group is 65-69. That compares to 29% in January 2010. Projecting forward beyond five years, the participation rate for 70-74 could be more than double the January 2010 rate by January 2020.

If social security retirement benefit eligibility ages are moved forward several years, as many believe will be necessary, the employment participation rates for people up to age 75 may increase even more than suggested by the poll numbers.

And the very low participation rates for those 75+ could skyrocket. If 80 becomes the new 70 and 70 becomes the new 60, estimates for where we are headed can be read from the last table above: just add ten years to every age group.

Disclosure: No stocks mentioned.